As previously discussed in our prior article on this topic, the Department of Veterans Affairs (“VA” or the “Department”) recently issued new requirements for ensuring cash-out refinance loans provide a net tangible benefit to the borrower, to be effective February 15, 2019. At the time the VA issued the new requirements in VA Circular 26-18-30, the Department did not provide model forms to satisfy the new requirements. Many questions remained regarding what information needed to be considered and presented on the forms. On February 14, 2019, the Department issued VA Circular 26-19-5 to address these items.
VA Circular 26-19-5 includes model forms to satisfy the net tangible benefit requirements for the Type I and Type II Cash-out Refinances defined in the prior circular. The circular also provides guidance for how to complete most of the new model forms, though the instructions still leave a few unanswered questions.
As the guidance and publication of model forms was provided by VA the day before the requirement was effective, DocMagic implemented the requirements using DocMagic developed forms and according to the guidance we were able to previously obtain from the VA. These forms were available to our customers on February 15, 2019 to comply with the new requirements.
However, as the VA has now published model forms and associated guidance, DocMagic is immediately updating our systems to return the VA-provided model form versions instead of the previously-announced forms.
Changes to Forms and Programming
The VA provided two new forms in Exhibit A to Circular 26-19-5: one form to be provided in the initial disclosures and one to be provided at closing. Lenders would use the same forms whether the loan is a Type I or a Type II Cash-out Refinance. These forms will replace the previously announced VA Net Tangible Benefit Worksheet (VANTBW.MSC), which will be retired. VARLC.MSC will continue to be used for a Type I Cash-out Refinance.
The new form VA Guaranteed Home Loan Cash-Out Refinance Comparison Certification – Initial (VAGHLCOI.MSC) will include Sections I-III of the VA model form and be included in initial disclosure packages. The new form VA Guaranteed Home Loan Cash-Out Refinance Comparison Certificate – Final (VAGHLCOF.MSC) will include Sections IV-VII of the model form and be included in closing packages.
As stated in our prior article, DocMagic created additional data points to collect the data necessary for the VA loan comparison chart. We will use the same new data points to complete the new forms. However, we have modified the programming in some cases to reflect the recent guidance provided by VA.
DocMagic will release the new forms Tuesday, February 19, 2019. Should you have any questions, please feel free to contact DocMagic’s Compliance Department.
